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FICO® Scores And Your Mortgage

 

Years ago, credit scoring had little to do with mortgage lending. When reviewing the credit worthiness of a borrower, an underwriter would make a subjective decision based on past payment history.

Then things changed.

Lenders studied the relationship between credit scores and mortgage delinquencies. There was a definite relationship. Almost half of those borrowers with FICO® scores below 550 became ninety days delinquent at least once during their mortgage. On the other hand, only two out of every 10,000 borrowers with FICO® scores above eight hundred became delinquent.

So lenders began to take a closer look at FICO® scores and this is what they found out. The chart below shows the likelihood of a ninety day delinquency for specific FICO® scores.

FICO® Score Odds of a Delinquent Account
595 2 to 1
600 4 to 1
615 9 to 1
630 18 to 1
645 36 to 1
660 72 to 1
680 144 to 1
780 576 to 1

If you were lending a couple hundred thousand dollars, who would you want to lend it to?

FICO® Scores, What Affects Them, How Lenders Look At Them

Imagine a busy lending office and a loan officer has just ordered a credit report. He hears the whir of the laser printer and he knows the pages of the credit report are going to start spitting out in just a second. There is a moment of tension in the air. He watches the pages stack up in the collection tray, but he waits to pick them up until all of the pages are finished printing. He waits because FICO® scores are located at the end of the report. Previously, he would have probably picked them up as they came off. A FICO® above 700 will evoke a smile, then a grin, perhaps a shout and a “victory” style arm pump in the air. A score below 600 will definitely result in a frown, a furrowed brow, and concern.

FICO® stands for Fair Isaac & Company, and credit scores are reported by each of the three major credit bureaus: TRW (Experian), Equifax, and Trans-Union. The score does not come up exactly the same on each bureau because each bureau places a slightly different emphasis on different items. Scores range from 365 to 840.

Some of the things that affect your FICO® scores:

  • Delinquencies
  • Too many accounts opened within the last twelve months
  • Short credit history
  • Balances on revolving credit are near the maximum limits
  • Public records, such as tax liens, judgments, or bankruptcies
  • No recent credit card balances
  • Too many recent credit inquiries
  • Too few revolving accounts
  • Too many revolving accounts

Sounds confusing, doesn’t it?

The credit score is actually calculated using a scorecard where you receive points for certain things. Creditors and lenders who view your credit report do not get to see the scorecard, so they do not know exactly how your score was calculated. They just see the final scores.

Basic guidelines on how to view the FICO® scores vary a little from lender to lender. Usually, a score above 680 will require a very basic review of the entire loan package. Scores between 640 and 680 require more thorough underwriting. Once a score gets below 640, an underwriter will look at a loan application with a more cautious approach. Many lenders will not even consider a loan with a FICO® score below 600, some as high as 620.

FICO® Scores and Interest Rates

Credit scores can affect more than whether your loan gets approved or not. They can also affect how much you pay for your loan, too. Some lenders establish a base price and will reduce the points on a loan if the credit score is above a certain level. For example, one major national lender reduces the cost of a loan by a quarter point if the FICO® score is greater than 725. If it is between 700 and 724, they will reduce the cost by one-eighth of a point. A point is equal to one percent of the loan amount.

There are other lenders who do it in reverse. They establish their base price, but instead of reducing the cost for good FICO® scores, they add on costs for lower FICO® scores. The results from either method would work out to be approximately the same interest rate. It is just that the second way looks better when you are quoting interest rates on a rate sheet or in an advertisement.

FICO® Scores And Mortgage Underwriting Decisions

FICO® Scores as Guidelines

FICO® scores are only guidelines and factors other than FICO® scores also affect underwriting decisions. Some examples of compensating factors that will make an underwriter more lenient toward lower FICO® scores can be a larger down payment, low debt-to-income ratios, an excellent history of saving money, and others. There also may be a reasonable explanation for items on the credit history report that negatively impact your credit score.

They Don’t Always Make Sense

Even so, sometimes credit scores do not seem to make any sense at all. One borrower with a completely flawless credit history can have a FICO® score below 600. One borrower with a foreclosure on her credit report can have a FICO® above 780.

Portfolio & Sub-Prime Lenders

Finally, there are a few portfolio lenders who do not even look at credit scoring, at least on their portfolio loans. A portfolio lender is usually a savings & loan institution that originates some adjustable rate mortgages that they intend to keep in their own portfolio rather than selling them in the secondary mortgage market. These lenders may look at home loans differently. Some concentrate on the value of the home. Some may concentrate more on the savings history of the borrower. There are also sub-prime lenders, or “B & C paper” lenders, who will provide a home loan, but at a higher interest rate and cost.

Running Credit Reports

One thing to remember when you are shopping for a home loan is that you should not let numerous mortgage lenders run credit reports on you. Wait until you have a reasonable expectation that they are the lender you are going to use to obtain your home loan. Not only will you have to explain any credit inquiries in the last ninety days, but also numerous inquiries will lower your FICO® score by a small amount. This may not matter if your FICO® is 780, but it would matter if it is 642.

Don’t Buy A Car Just Before Looking for a Home!

A word of advice not directly related to FICO® scores. When people begin to think about the possibility of buying a home, they often think about buying other big-ticket items, such as cars. Quite often when someone asks a lender to pre-qualify them for a home loan there is a brand new car payment on the credit report. Often, they would have qualified in their anticipated price range except that the new car payment has raised their debt-to-income ratio, lowering their maximum purchase price. Sometimes they have bought the car so recently that the new loan doesn’t even show up on the credit report yet, but with six to eight credit inquiries from car dealers and automobile finance companies it is kind of obvious. Almost every time you sit down in a car dealership, it generates two inquiries into your credit.

Credit History is Important

Nowadays, credit scores are important if you want to get the best interest rate available. Protect your FICO® score. Do not open new revolving accounts needlessly. Do not fill out credit applications needlessly. Do not keep your credit cards nearly maxed out. Make sure you do use your credit occasionally. Always make sure every creditor has their payment in their office no later than 29 days past due.

And never ever be more than thirty days late on your mortgage. Ever.

GOT QUESTIONS? 

Top 10 Tips for Selling Your Home During the Holidays

 

The holiday season from November through January is often considered the worst time to put a home on the market. While the thought of selling your home during the winter months may dampen your holiday spirit, the season does have its advantages: holiday buyers tend to be more serious and competition is less fierce with fewer homes being actively marketed. First, decide if you really need to sell. Really. Once you've committed to the challenge, don your gay apparel and follow these tips from FrontDoor.
 

  1. Deck the halls, but don’t go overboard.
    Homes often look their best during the holidays, but sellers should be careful not to overdo it on the decor. Adornments that are too large or too many can crowd your home and distract buyers. Also, avoid offending buyers by opting for general fall and winter decorations rather than items with religious themes.
     
  2. Hire a reliable real estate agent.
    That means someone who will work hard for you and won't disappear during Thanksgiving, Christmas or New Year's. Ask your friends and family if they can recommend a listing agent who will go above and beyond to get your home sold. This will ease your stress and give you more time to enjoy the season.
     
  3. Seek out motivated buyers.
    Anyone house hunting during the holidays must have a good reason for doing so. Work with your agent to target buyers on a deadline, including people relocating for jobs in your area, investors on tax deadlines, college students and staff, and military personnel, if you live near a military base.
     
  4. Price it to sell.
    No matter what time of year, a home that’s priced low for the market will make buyers feel merry. Rather than gradually making small price reductions, many real estate agents advise sellers to slash their prices before putting a home on the market.
     
  5. Make curb appeal a top priority.
    When autumn rolls around and the trees start to lose their leaves, maintaining the exterior of your home becomes even more important. Bare trees equal a more exposed home, so touch up the paint, clean the gutters and spruce up the yard. Keep buyers’ safety in mind as well by making sure stairs and walkways are free of snow, ice and leaves.
     
  6. Take top-notch real estate photos.
    When the weather outside is frightful, homebuyers are likely to start their house hunt from the comfort of their homes by browsing listings on the Internet. Make a good first impression by offering lots of flattering, high-quality photos of your home. If possible, have a summer or spring photo of your home available so buyers can see how it looks year-round.
     
  7. Create a video tour for the Web.
    You'll get less foot traffic during the holidays thanks to inclement weather and vacation plans. But shooting a video tour and posting it on the Web may attract house hunters who don't have time to physically see your home or would rather not drive in a snowstorm. 
     
  8. Give house hunters a place to escape from the cold.
    Make your home feel cozy and inviting during showings by cranking up the heat, playing soft classical music and offering homemade holiday treats. When you encourage buyers to spend more time in your home, you also give them more time to admire its best features.
     
  9. Offer holiday cheer in the form of financing.
    Bah, humbug! Lenders are scrooges these days, but if you've got the means, then why not offer a home loan to a serious buyer? You could get a good rate of return on your money.
     
  10. Relax — the new year is just around the corner.
    The holidays are stressful enough with gifts to buy, dinners to prepare and relatives to entertain. Take a moment to remind yourself that if you don't sell now, there's always next year, which, luckily, is only a few days away.

CLICK HERE if you're wondering what your home could be worth. 

Setting The Price

The price is the first thing buyers notice about your property. If you set your price too high, then the chance of alienating buyers is higher. You want your house to be taken seriously, and the asking price reflects how serious you are about selling your home.

Several factors will contribute to your final decision. First, you should compare your house to others that are in the market. If you use an agent, he/she will provide you with a CMA (Comparative Market Analysis). The CMA will reflect the following:

  • houses in your price range and area that were sold within the last half-year
  • asking and selling prices of houses
  • current inventory of houses on the market
  • features of each house on the market

From the CMA, you will learn the difference between the asking price and selling price for all homes sold, the condition of the market, and other houses comparable to yours.

Also, try to find out what types of houses are selling and see if it applies to your area. Buyers follow trends, and these trends can help you set your price.

Always be realistic. Understand and set your price to reflect the current market situation.

Build A Plan Of Action And Get Ready

 

Buying a home will probably rank as one of the biggest personal investments one can make. Being organized and in control will contribute significantly to getting the best home deal possible with the least amount of stress. It’s important to anticipate the steps required to successfully achieve your housing goal and to build a plan of action that gets you there.

Before you can build a plan of action, take the time to lay the groundwork for your decision-making process.

First, ask yourself how much you can afford to pay for a home. If you’re not sure on the price range, find a lender and get pre-approved. Pre-approval will let you know how much you can afford, allowing you to look for homes in your price range. Getting pre-approved also helps you to alleviate some of the anxieties that come with home buying. You know exactly what you qualify for and at what rate, you know how large your monthly mortgage payments will be, and you know how much you will have for a down payment. Once you are pre-approved, you avoid the frustration of finding homes that you think are perfect, but are not in your price range.

Second, ask yourself where you want to live and what the best location for you and/or your family is. Things to consider:

  • convenience for all family members
  • proximity to work, school
  • crime rate of neighborhood
  • local transportation
  • types of homes in neighborhood, for example condos, town homes, co-ops, newly constructed homes etc.

CLICK HERE to get started on your journey to home ownership

6 Step Action Plan For Sellers

 

 

Plan of Action

  1. Analyze why you are selling - If you understand your motives, you will be able to better negotiate and to get what it is that you want, whether it be a quick sale, high price, or somewhere in the middle.

  2. Prepare your home for the buyer - Maximize the strengths of your property and fix up its weaknesses. You want the buyer to walk away from your home with a lasting good impression.

  3. Find a good real estate agent that understands your needs - Make sure that your agent is loyal to you, and can negotiate to help you achieve your goals. In addition, they should be assertive and honest with both you and the buyer.

  4. Be prepared for negotiation - Learn and understand your buyer’s situation; what are their motives? Can you demand a big deposit from them? Try to lock in the buyer so that the deal goes through.

  5. Negotiate for the best price and the best terms - Learn how to counter offer to get maximum value from every offer.

  6. Make sure the contract is accurate and complete - Be honest with your disclosures; you do not want to lose the deal because you were lying or diminishing your home’s defects. Insist the buyers get a professional inspection. This will protect both you and the buyer.

 

CLCIK HERE to check the comparable sales for your home.

1634 Horseshoe TER Deltona,Fl.

 

This wonderful 3 bedroom, 2 bath block home could very well be the perfect home for you and your family! Seated in a great location just off Providence provides easy access to I4 in either direction. This spacious home sports an open layout and an updated master bathroom. The screened enclosed back porch is a perfect place to enjoy barbecues and cookouts. Take a peek at the virtual tour for additional photos. MLS#  V4721050 and priced to sell at just $165,000

Open House is scheduled for October 21st from 11:00am to 2:00 pm
CLICK HERE to view the virtual tour.

What Impacts Your Credit History?

 

Good credit is a lot like trust it takes years to build but can fall apart in minutes.

But, having a bad or poor credit score isn’t the end of the world. If you’re simply willing to work hard to improve your credit, then you’ve already started. Now, you’re probably wondering how long it takes to rebuild your credit. The true answer is “it varies."

What Impacts Your Credit History?

There are many different factors in determining your credit worthiness (i.e. how risky it is to give you a loan). When deciding if they want to approve your loan or credit card application, lenders are especially interested in:

Whether or not you’ve made past payments on time.

How much you paid off each time do you make minimum payments, pay the entire amount or pay some amount in between?

Your number of open lines of credit, credit cards, mortgages, student loans, etc.

Your Credit Utilization Ratio (your amount borrowed over your available credit) — for example, if you have $10,000 in available credit and you have an ongoing balance of $8,500, then you’re using 85% of your credit! Limit yourself to utilizing no more than 30% of your available credit each month.

If you have a bad or poor credit score don’t despair there might be a couple areas you can improve. One way to pinpoint an area where you’re struggling is to request a free copy of your credit report and look for red flags that could use improvement. For instance, if you have several lines of credit open, consider focusing on paying off your cards with the highest interest rates. This will lower your credit utilization ratio, which will help to improve your credit score.

Meanwhile, continue making minimum payments on your other cards that have lower interest in order to build up a history of on-time payments, which plays a major role in determining your credit score.

For more help with your credit report visit our Homeownership Course

 

Priority tasks for your move in

Moving into a new home is an exciting time, and you're probably daydreaming about decor and paint schemes and new furniture. But before you get into the fun stuff, there are some basics you should cover first.

Change the locks

Even if you're promised that new locks have been installed in your home, you can never be too careful. It's worth the money to have the peace of mind that comes with knowing that no one else has the keys to your home. Changing the locks can be a DIY project, or you can call in a locksmith for a little extra money.

Steam clean the carpets

It's good to get a fresh start with your floors before you start decorating. The previous owners may have had pets, young children, or just some plain old clumsiness. Take the time to steam clean the carpets so that your floors are free of stains and allergens. It's pretty easy and affordable to rent a steam cleaner-your local grocery store may have them available.

Call an exterminator

Prior to move-in, you probably haven't spent enough time in the house to get a view of any pests that may be lurking. Call an exterminator to take care of any mice, insects, and other critters that may be hiding in your home.

Clean out the kitchen

If the previous occupants wanted to skip on some of their cleaning duties when they moved out, the kitchen is where they probably cut corners. Wipe down the inside of cabinets, clean out the refrigerator, clean the oven, and clean in the nooks and crannies underneath the appliances.

AVOID THESE TWO BIG MORTGAGE MISTAKES

 

We all know that searching for and viewing potential homes is the fun part of the home-buying process. The not-so-fun part? The mortgage.

But if you don't pay attention to the details, your mortgage can end up dragging down the enjoyment of your new home and cause some major regrets. Here are a few mistakes to avoid to ensure that you love your mortgage terms as much as your hew home.

Don't find your home first: Shopping around for the best mortgage rate should be the first step in the home buying process. You may even want to talk to a mortgage broker a full year before you plan to buy. It'll give you time to get your affairs in order to qualify for the best rate, could save you thousands of dollars in the long run, and you won't feel rushed to accept an unattractive loan because you're worried you'll miss out on your dream home.

Don't forget your real budget: There's often a big difference between what a lender says you can afford and what you can actually afford. Your debt-to-income ratio doesn't include the money you spend on hobbies, or the cost of commuting to work, or maintenance and utility costs. Really sit down and examine your spending before committing to the loan amount the lender is offering. You won't enjoy your home nearly as much if it's eating into your favorite hobbies.

JULIE CVERCKO
386-668-8668
840 Deltona Blvd. St. F-1
Deltona, Florida 32725
Julie@primerealestateinc.com

Here's What Our Clients Say About Us

After a great experience with Prime Real Estate Inc., Julie and her family deserve recognition for their dedication to us during this exciting, yet stressful time. Tommy met with us multiple occasions to view homes and Jake called to check in on us during the process as well. Julie was always prompt with answering questions and ensuring needs were met, and every problem was always met with a solution! We wouldn't be in a home yet if it weren't for the hard work of Julie and her team. We are now two weeks into our new home and we are so happy with the outcome, all thanks to Julie, Jake, and Tommy! Thank you Jeff & Sharon Mathews
I am Mortgage Loan Originator with Quicken Loans. If you want to make sure you get the best experience to purchase a home Julie is the right real estate agent. Julie is a true professional. She keeps you in the loop with everything and makes sure you will close on your home. Thank you so much for making our clients feel comfortable to work with you. I look forward to working with Julie again! Jimmy Yatuoma /Quicken Loans
Prime Real Estate was very helpful in helping look for houses to purchase as my primary home Jose Castro
From the time we started this crazy process back in February he has been with us every single step of the way trying to make this work! We finally closed on our new home yesterday. There was so much bending over backwards on everyone's end and Michael was so accommodating and made this process a lot less scary. It's been one hell of a ride. From putting an offer in the day of the open house, figuring out a rental agreement when our loan didn't work out at first due to my husband getting out of the Marine Corps, having to take care of all the craziness of moving into and trying to be said house(power,water,Internet, etc.), getting all of our forms submitted correctly and in time to close, and FINALLY, MOST IMPORTANTLY, Michael helped us do something we were starting to think was impossible after everything going on. Thank you so much and if anyone is looking to buy or sell call him first! So amazingly personable and helpful, absolutely wonderful!! Cassandra and Herbert Boggs
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